is your plan upside down?
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
we’ve seen that other firms frequently have seen negative situations occur when they don’t address them up front in their firm policies or agreements. this question addresses whether firms are proactively preparing for these occurrences.
consider creating two classes of partners.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
when partners plan to retire, how do we go about creating additional capacity or freeing up the necessary capacity to handle the client transitions that need to occur?
more on performance management: partner retirement and the war for clients | succession: the questions to care about | 7 succession questions to ignore for now | develop your employees or suffer the consequences | what having your employees’ backs means | 5 harmful management attitudes (and how to fix them) | job 1 for the practice owner: client management
first, all of the “c” clients, which is our shorthand way of describing the smallest clients the firm serves – who while profitable, don’t have much opportunity to hire us for additional services – should not be transitioned to partners, but rather to managers.
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should you add a partner … or capacity? they’re not the same thing.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
let’s assume you have a retiring partner. you have decided how to pay the partner for his/her value in the firm, you have pinned down the mandatory sale of ownership date (mso) so you can phase that partner out of his or her leadership role in the firm, and you have covered the single most abused part of the succession process, which is client transition. it is now time to discuss how to find replacements for the retiring senior partners.
more on performance management: action plans for transitioning partners | partner retirement and the war for clients | succession: the questions to care about | the pitfalls of equity allocation and reallocation | cpa firm performance assessments: 15 core competencies, 21 questions | how to target what skills to develop now
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the most commonly asked question on this topic is “how can we find people with the same technical skills, management ability, client service capacity and vision for the firm’s future as those who are leaving?” the simple answer is “you won’t, so stop looking for that exact combination.”
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the transition process is about making the retiring partner less attractive as the client’s first point of contact.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
the key to the client transition process is the action plan that the transitioning partner needs to follow for each client.
more on performance management: partner retirement and the war for clients | how retirement issues affect succession planning | 7 succession questions to ignore for now | the pitfalls of equity allocation and reallocation | how to target what skills to develop now | job 1 for the practice owner: client management
for a small tax client, the directive could be as simple as a one-year transition and turning it over to whoever has been assigned to take over that account. for example, the action plan might be something like:
improper transitions can lead to reduced retirement benefits.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
when a partner is retiring, there is a transition process that we recommend. let’s break it down into a few simple steps:
more on performance management: how client transition is abused | best practices for mandatory retirement | how retirement issues affect succession planning | succession: the questions to care about | 7 succession questions to ignore for now | how partner ratings factor into equity | hazards of not reallocating equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences | cpa firm performance assessments: 15 core competencies, 21 questions | how to target what skills to develop now | what having your employees’ backs means | 5 harmful management attitudes (and how to fix them) | do cpa firms need management or leadership? | job 1 for the practice owner: client management
bonus checklist: 8 best uses for a retiring partner.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
once a firm is ready to phase out a partner in retirement, it’s time to move on to the client transition process. but this is the single most abused part of the entire succession process.
more on performance management: best practices for mandatory retirement | how retirement issues affect succession planning | 7 succession questions to ignore for now | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | cpa firm performance assessments: 15 core competencies, 21 questions | what having your employees’ backs means | 5 harmful management attitudes (and how to fix them)
the reason why this part of the process is the most abused is because both sides – the partner nearing mso (henceforth referred to as retiring partners or retired partners) and the remaining partners – are motivated to do the wrong things. for example, it is in the best interest of retiring partners to not transition their clients because if they don’t, the firm will need to keep them around to continue to work on them after mso. if this isn’t bad enough, because they did not transition their clients properly, the retired partners have a great deal of leverage since they are now entitled to their full retirement pay and still have control over some or most of their client base. this allows the retired partners to gain additional benefits from the partner group by basically reselling their clients to them again. unfortunately, this situation is more the norm than the exception.
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the work retired partners should – and shouldn’t – do if they stay on.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
once “fair” retirement benefits have been determined, for this moment in time, we can move on to the next step in building our succession plan. the reason i mention that we are simply putting stakes in the ground is because as we set additional stakes in the ground, those new stakes might require us to rethink a decision made when setting a previous stake.
more on performance management: how retirement issues affect succession planning | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences
for example, if the firm later establishes premium perks for past owners who want to continue to work for the firm after sale of ownership, then that might require reassessing the retirement benefit calculation agreed to when setting that earlier stake (because in the end, the retirement benefit is about the whole package offered, not just one component).
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if you believe your firm will be dysfunctional without you, now is the time to fix it.
by bill reeb, dominic cingoranelli, and tommye barie
the succession institute
when we take our clients through succession planning, eventually the focus turns to implementing the best practices for running a firm – but first we normally have to start with short-term retirement issues.
more on performance management: succession: the questions to care about | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | cpa firm performance assessments: 15 core competencies, 21 questions | what having your employees’ backs means
why? because typically you won’t get any buy-in for change until the partners have looked at whether the current retirement system is paying at least roughly a fair market value to the near-term retiring partners.
bonus checklists: 5 rules to govern a succession plan. 8 keys to an effective compensation system.
by bill reeb and dominic cingoranelli
we’ve seen a lot of frequently shared, misdirected advice on commonly discussed succession issues. we would rather stop focusing on symptoms and start focusing on resolving the root cause issues that a good succession plan should address.
more on performance management: 7 succession questions to ignore for now | hazards of not reallocating equity | develop your employees or suffer the consequences | how to target what skills to develop now | what having your employees’ backs means
our solution: the robust succession framework
first and foremost, good succession management is a function of good business operating practices. over and over, we find successful firms – including many that have even effectively retired partners in the past – that are overlooking some very important best practices.
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there’s some misdirection in succession management out there.
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
you can’t go a week without seeing some article or blog focused on succession management and everyone seems to have a different opinion as to what is important when addressing succession. so, we thought it was time we challenged some of the more common misconceptions.
more on performance management: how partner ratings factor into equity | hazards of not reallocating equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences | 5 harmful management attitudes (and how to fix them) | do cpa firms need management or leadership?
the first thing most authors want to focus on with succession is the development of future leaders. then the dialogue will shift quickly to mentoring programs, leadership training and more. well, it would be hypocritical for us to disagree with this because we actually develop and conduct these kinds of programs. however, training such as this is only valuable after many other issues are addressed first. so, while it is important, i guess the best phrase to describe this is “first things first,” and this is not first by any stretch of the imagination.
how to decide who gets how much voting power.
by bill reeb and dominic cingoranelli
people who can lead, develop, train and supervise others are worth much more than those who can just make themselves faster, better and stronger.
equity ownership allocation is a critical success factor if you expect your firm to continue after you leave. for many firms, reallocation of equity ownership is or will be an important part of succession planning. while it can cause some anxiety for your owners’ group as you go through the process, it’s better to confront the issues now, to help ensure that your firm is in good hands after your leave. it’s not necessarily easy, but it must be addressed for long-term success.
more on performance management: hazards of not reallocating equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences | cpa firm performance assessments: 15 core competencies, 21 questions | do cpa firms need management or leadership?
when you are deciding which partners should have more say (or less say, which is just as important), you need to consider issues such as whose judgment partners trust, who is pulling the wagon, who consistently acts in the firm’s best interest, or who is viewed as a current or future leader. with this in mind, here are nine areas to evaluate or each partner: read more →
“this stage is usually when the crap hits the fan in many organizations.”
by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute
let’s look at the common pitfalls we find with ownership distribution, using scenarios to drive home various points. let’s say we have a five-partner firm.
the ownership and age is as follows:
partner equity age
senior partner 1 (sp1) 35% 65
senior partner 2 (sp2) 35% 63
junior partner 1 (jp1) 15% 53
junior partner 2 (jp2) 10% 48
junior partner 3 (jp3) 5% 42
first of all, many firms would die for this kind of age split as – unfortunately – many firms have partners much closer in age than this 23-year range example. but continuing on, let’s say senior partner 1 (sp1) wants to retire at the end of this year. if this would occur as it does in many firms, we would be scrambling for additional partners. but for the sake of this discussion, let’s say we just addedjunior partner 3 (jp3) last year and we will add jp1 immediately after sp1’s retirement with an ownership interest of 5 percent.
so, if this were to occur without unusual intervention, the new ownership percentages would look something like this a year later:
the pitfalls of equity allocation and reallocation.
by bill reeb and dominic cingoranelli
i want to address the issue of equity – how it is commonly allocated to begin with, and then making adjustments to it over time.
for many firms, the idea in the beginning is that “all the partners are the same, so their ownership should be the same.” when the firm starts out with only a shingle, this is a very fair premise. so, for the sake of this column, let’s start out with a two-partner firm and build from there, talking through the common issues that arise in the area of distributing equity ownership.
more on performance management: develop your employees or suffer the consequences | cpa firm performance assessments: 15 core competencies, 21 questions | how to target what skills to develop now | what having your employees’ backs means | 5 harmful management attitudes (and how to fix them) | do cpa firms need management or leadership? | job 1 for the practice owner: client management
start with two
the most common approach would be for the two partners to split the ownership 50/50. the reason why this often works so well is because the two people who join together often are brought together because of their complementary skills. for example one might be very technically competent and the other more marketing savvy. together they make a great team – one, without the other, is less effective.